In his presentation at the 2017 Society of Petroleum Engineers (SPE) Annual Oloibiri Lecture Series and Energy Forum, president of Nigerian Gas Association (NGA), Engr. Dada Thomas, did note the importance of natural gas to the economy. He however raised the questions that border on how it has been able to affaect the lives of Nigerians positively. FESTUS OKOROMADU in this report brings out the highlight of that presentation
The 2017 SPE Olobiri Lecture Series & Energy Forum which held in Abuja with the term focused on the utilisation of natural gas in Nigeria with the theme: “Domestic Gas Utilisation in Nigeria – From Product to Users,” may have come and gone but the issues raised in that lecture deserved quick attention if the nation’s economy was to advance.
Some of the pertinent issues raised were contained in the presentation of Engr. Dada Thomas who doubles as the president of Nigerian Gas Association (NGA) and the chief executive officer (CEO) of Frontier Oil Limited.
Dada while describing himself as a key stakeholder that was heavily involved in the Nigerian domestic gas (DomGas) industry, stressed that his commitment was both as one of the largest supplier of gas to the DomGas market and as the president of the NGA with nearly 40 years’ experience in the exploration and production (E&P) world.
According to him, Nigeria has gas reserves of 187 TCF, hence the country is ranked 9th globally in terms of conventional gas reserves, but regretted that only about 51 TCF was readily available for production. Consequently, Nigeria is trailing in 22nd position globally in terms of gas production and utilisation.
He explained that of the 187 TCF of gas deposit about 48 per cent was associated gas (AG) while the balance 52 per cent was non-associated gas (NAG).
Similarly, while 42 per cent is located offshore the remaining 58 per cent is distributed onshore over a large geographical area and largely in small pockets of less than 1TCF. Thus harnessing Nigeria’s gas resources is neither easy nor cheap, he noted.
Currently, about 73 per cent of Nigeria’s gas reserves are controlled under Joint Venture (JV) contracts, largely by International Oil Companies (IOCs), while 12 per cent is under Production Sharing Contracts (PSC) and 15 per cent is under sole risk contracts by indigenous companies including 2 per cent by marginal field operators, he stated.
According to him, the distribution of control of gas resources is considered by many as a major impediment to accelerated development of the Domestic Gas market.
He then raised the question of how well the country has used this abundant natural resource and how it intends to use it going forward?
While trying to provide an answer,Dada said the domestic gas market has grown over the years but still only 13 per cent or 1.01BCF of total gas production of 7.5BCF/d was consumed locally while 43 per cent was exported (via LNG & West African Gas Pipeline), 34 per cent used for gas injection and 10 per cent was flared.
He explained that the growth in production came about largely by encouragement followed by compulsion. The end result , he said was that Nigeria occupies the 22nd position in the production of gas in the world and found itself in a perfect storm and generating less than 5 GW of grid power while flaring enough gas to generate 2 GW to 3 GW of electricity and power plants were starved of gas.
According to him, the bulk of Nigeria’s domestic gas was consumed by power plants within an illiquid and poorly regulated gas-to-power value chain that is threatening to cause systemic bankruptcy of all parts of the value chain and possibly the banking sector.
“We therefore have to conclude that we haven’t properly exploited our gas resources for domestic use for the benefit of our nation or our people and those brave enough to invest in our country’s development,” he submitted.
Dada stated that the gas value chain was vast ranging from the upstream E&P sector (the producers) to the mid-stream (the gas processing and transportation companies) to the down-stream or consumers (power sector, gas-based industries (commercial entities and retail consumers).
He explained that the value chain was so extensive that it has the potential to transform the entire fortune of a nation if effectively harnessed. Illustrating with happenings in other parts of the world he said, Trinidad (population less than 1.36 million) and The Netherlands (population of 16.9 million) have been able to achieve much by leveraging their modest gas resources. “Trinidad has a per capita GDP of $16,696, The Netherlands per capita GDP of $51,268.47 while Nigeria has a per capita GDP of only $2,758,” he said.
Empirical studies, he said showed a correlation between gas/power consumption and GDP submitting that clearly Nigeria was ineffective in maximising the benefits of gas.
According to him, “Very little has been said apart from the needs of the power sector earlier.”
He explained that companies have to rise up to the challenge of ramping up domestic gas production from the current level of 1.01BCF/d to the forecast level of 2.5BCF/d over the next 5 years.
The Independent Petroleum Producers Group (IPPG), he said, estimates that this would require initial investments of $6billion annually over a period of four years and dropping to $3billion annually thereafter in the new gas production processing and transportation infrastructure.
“The gas requirement is significant and cannot be realised unless gas resources currently untapped are freed up and made available to those willing to develop them.
“Nigeria has only 4,000km of gas pipelines while countries like Holland, the UK and Egypt with only 30TCF, 9TCF and 65TCF respectively of gas reserves have 9,000Km, 29,000Km and 8,000Km of pipelines respectively.
“This infrastructure gap required to meet the nation’s needs will be very expensive to bridge. To achieve the objectives set out in the Nigerian Gas Master Plan, Nigeria would require approximately $10billion over a 2 to 4- year period and create job opportunities for local line pipe manufacturing plants, construction companies and pipeline operators and annual income of about $0.75billion.
“Within the mid-stream sector a number of new initiatives based on traditional gas treatment technologies are now being deployed in Nigeria and will help revolutionise the domestic gas industry.
Key amongst these are a Compressed Natural Gas (CNG) – a 500mmscf/d industry that could sustain a $1billion/annum industry,micro/mini LNG, a 500mscf/d industry that could sustain a $1.6billion/annum industry,Liquefied Petroleum Gas (LPG).
“Growing LPG consumption from 2kg/capita or 400metric tonne/annum to 12Kg-20kg/capita (3 to5million metric tonne/annum) could generate over $10billion industry. The scale of the potential market is significant,” he said.
In conclusion he submitted that, “Having underperformed in the development of Domestic Gas for the benefit of the nation in the past and currently struggling in the eye of a perfect storm we truly need to develop and implement radically different and new policy solutions in a consistent, transparent and equitable business friendly manner to be able to attract investment capital and ensure we don’t repeat the mistakes of the past but instead grow a profitable, economic and bankable gas industry from producers to consumers that will enhance the energy security of Nigeria, equitable returns for investors, good and consistent return for the Nigerian nation and people, facilitate local value creation and diversification of the economy that will ensure that we are able to meet the needs of a population of 180million today that is forecast to grow to 233 million by 2025 and 398 million by 2050.
“I strongly believe as a former science and later engineering student that this simple equation is valid now and will remain valid for a long time to come : “Gas=Power=Economic diversification”.
Conversely “No gas =No power= No Economic Diversification”. Failure to do the right thing is not an option for the consequences could be very grave. All you have to do is talk to those under 30 years old and you will understand that they see a very bleak future and many have lost hope. We can’t afford to be a nation whose young have lost hope,” he stated.